[Blank Page in Original Bulletin]

The Texas
Retail Meat Industry —

Structure, Operational Characteristics,
and Competitive Practices

All programs andiinformation of The Texas Agricultural Experiment Station are available to everyone without regard
to race, color, religion, sex, age, or national origin.

Mention of a trademark or a proprietary product does not constitute a guarantee or warranty of the product by The
Texas Agricultural Experiment Station and does not imply its approval to the exclusion of other products that also
may be suitable.

[Blank Page in Original Bulletin]

CONTENTS

 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I 
 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I l
Structural Characteristics of the U.S. Retail Food Industry... 2

Characteristics of the Texas Retail Meat Industry............. 6
  FiVrmSIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIlo
Volume and Type of Meat Handled............................l1 '
Quality of Meat Handled and Grading Practices Employed.....l7
Centralized Fabrication and Processing.....................18

   SupplieSIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIZO
Geographic Sources of Meat Purchases.......................20
  SupplierIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII21

Form of Meat Purchases and Sales..............................24
 PurchavSeSIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII24
 SaleSIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII27

Purchasing and Selling Practices..............................29
Meat Purchasing Practices..................................29
Meat Selling Practices.....................................33

Promotional and Advertising Practices.........................34

SumaryIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII38

 CitedIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII45

 TablesIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII46

ACKNOWLEDGMNTS

The author gratefully acknowledges helpful comments and sug-
gestions by Donald E. Farris during the preparation of the original
manuscript. Helpful suggestions were also provided by Agricultural
Economics Department review comittee members Vernon E. Schneider,
William J. Vastine, Edward Uvacek, and Zerle L. Carpenter of the
Animal Science Department.

ii

HIGHLIGHTS

The retail meat industry has undergone dramatic changes during the
last two decades in terms of industry structure, purchasing and merchan-
dising techniques, type and quality of products sold, and meat handling
and distribution practices. This study focused on these questions and
is the first in a series of three studies designed to analyze the mar-
ket structure, performance, and competitive practices of the Texas meat
industry at the retail, wholesale, and slaughter levels.

Data for this study were obtained through personal interviews with
owners and managers of retail grocery firms in Texas for 1974. Respond-
ents were selected on a stratified random sample basis to represent
every segment of the retail grocery industry and to provide data for
varying sizes of retail firms. Completed questionnaires represented
data from firms which handled approximately 7O percent of the total fresh
and processed red meat sold by retailers in Texas during 1974.

The Texas retail meat industry is characterized by large, diversi-
fied supermarkets which feature mass selling techniques and merchandise
meat products on a strict specification basis. In 1974, supermarkets
accounted for more than 90 percent of the 1,040 million pounds of fresh and
processed red meat merchandised by Texas retail food stores. Grocery firms
and affiliated independent groups with ll or more stores accounted for
more than four—fifths of the fresh and processed meat items sold by Texas
retail stores during 1974.

Steer and heifer beef, primarily fed beef, represented almost 40 per-
cent of the fresh and processed meat items handled by retailers during

1974. Next in importance were smoked and cured pork, cow and bull beef,

iii

fresh pork, sausage and variety meats, calf, ground meat, lamb, and veal.

However, after cow and bull beef and trimmings from other fresh meats
were converted to ground meat, it then ranked second with 26 percent of
the total.

Texas retailers purchased steer and heifer beef under a strict set
of specifications concerning weight, sex, quality and yield grade, trim,
and color. Calf and lamb specifications included mostly quality grade
and weight. Pork specifications centered primarily on weight ranges for
specified cuts and trim.

Approximately 80 percent of the steer and heifer beef sold by Texas
retailers was reportedly equivalent in quality to U. S. Choice or
higher. However, retail firms with ll or more stores and those with 4
or more supermarkets reported that 90 percent of the steer and heifer
beef merchandised by their stores was equivalent to U. S. Choice or
higher. Calf sold by retailers was mostly U. S. Good, while veal and

lamb were predominantly U. S. Choice or higher. Cow and bull beef,

which is sold mostly as ground meat or sausage items, was generally U. S.

Commercial or lower.

Texas retailers purchased almost 80 percent of their meat require-
ments from suppliers within Texas. These suppliers were almost exclu—
sively packers. Texas suppliers were major sources for all types of
meat items except lamb and fresh pork. Fresh pork inshipments origi-

nated primarily from Kansas—Nebraska and Iowa, while lamb inshipments

originated mostly from Colorado, Oklahoma, South Dakota, and New Zealand.

Two—thirds or more of the total beef, calf, veal, and lamb was pur-

chased in carcass form. Steer and heifer beef not purchased as carcass

iv

beef was purchased as quarters, primals or subprimals, while noncarcass
cow and bull beef was purchased as boneless beef. Fresh pork was pur-
chased predominantly in wholesale or primal cuts.

Boxed meat purchases by retailers were confined to steer and heifer
beef, cow and bull beef, lamb, and fresh pork. About 44 percent of the
fresh pork was purchased as boxed meat, followed by boneless cow and
bull beef with 27 percent and steer and heifer beef with almost l6 per-
cent.

One-third of the total meat handled by Texas retailers during 1974
was processed in a centralized retail fabrication center prior to store
door delivery. Retail firms with ll or more stores accounted for 90
percent of the meat processed through retailer-owned central warehouse
and fabrication facilities. These firms reported that almost 40 per-
cent of their steer and heifer beef, 30 percent of their calf, and more
than two—thirds of their cow and bull was processed through centralized
retail warehouse and fabrication facilities. Fresh pork was generally
not processed through centralized facilities, but one—third of the
smoked and cured pork moved through centralized retail fabrication
centers for additional slicing and packaging.

Over 70 percent of the retailers used a predetermined markup to set
prices for fresh and processed meat items during 1974. The composite
markup (gross margin) of heavy beef averaged about 22 percent; it
averaged 23 percent for both calf and fresh pork and slightly higher for
smoked and cured pork and other processed items.

Meat promotion and advertising has become a standard competitive

practice for attracting customers by retailers. More than 57 percent

featured specials on fresh and processed meats on a weekly basis, while
another ll percent featured specials twice per week. Most of the re-
maining retailers did not feature specials or maintain regular promo-
tional programs.

Price discounts or markdowns during specials varied by type of
meat item. However, markdowns by retailers featuring specials on a
weekly or more frequent basis ranged from 10 to 30 percent. Over four-
fifths of the retailers interviewed found that specials increased total
meat sales from 20 to 40 percent.

The effect of meat promotions and specials on total retail sales
brought varied responses from retailers interviewed. Forty-five percent
found it difficult to estimate the effect of meat specials on total com-
pany sales, since such specials were conducted on a weekly or daily
basis. However, one-third of the retailers found company sales increas-
ing from l to 10 percent as a result of meat specials. Policies of con-
tinuous meat specials reflect concern with competitive position in the

market and maintenance of sales at desired levels by many retailers.

[Blank Page in Original Bulletin]

THE TEXAS RETAIL MEAT INDUSTRY --
STRUCTURE, OPERATIONAL CHARACTERISTICS, AND
COMPETITIVE PRACTICES

Raymond A. Dietrich *

The retail meat industry is characterized by rapidly changing
technology, highly competitive practices, and continued change in
structural and operational characteristics at the firm level. Store
numbers throughout the United States, including Texas, continue to
decline, while store size and sales volume per store continue to in-
crease. In addition, technological advances are evident in the
packaging, shipping, and storage of meat items. Centralized ware-
housing and meat fabrication centers as well as boxed meat programs
are prominent throughout the retail industry.

Changes within the Texas livestock and meat industry, similar to
those in the United States, are evident in the production, slaughtering,
and distribution sectors. With the development of large scale commer-
cial feedlot operations in Texas, specialized cattle slaughtering and
beef processing firms have established plants within the concentrated
cattle feeding area in the Texas Panhandle-Plains region. Many of
these specialized plants have installed facilities to fabricate car-
casses into primals or subprimals for shipment in bags or film wraps as

“boxed beef directly to retail distribution centers or individual stores.

bMushrooming industrial development and a rapidly growing population in

the Texas Gulf Coast and North Texas areas have been accompanied by

*.Associate professor, The Texas Agricultural Experiment Station (Depart-
ment of Agricultural Economics).

increases in numbers and size of large retail organizations which feature
mass selling techniques via one—stop shopping in supermarket facilities.
Further technological developments in refrigeration and transportation
systems, general usage of federal grading standards, and rigid specifi-
cations standards have allowed retail organizations to purchase and dis-
tribute consistent quality meat items over a larger geographic area.

These developments have precipitated changes at the retail level
in marketing and buying practices employed for fresh and processed meat;
the type and quality of meat items sold; handling and storage practices
and distribution channels employed; and strategies for competing in mar-
ket outlets. This study will focus on these questions and is the first
in a series of three studies designed to analyze the market structure,
performance, and competitive practices of the Texas meat industry at the
retail, wholesale, and slaughter levels. This study is designed to com-
plement and update a study of the Texas meat industry conducted in
1960 (1).

Data for this study were obtained through personal interviews with
owners and managers of retail grocery firms in Texas for 1974. Respond-
ents were selected on a stratified random sample basis as shown in Table
1. Completed questionnaires represented data from firms which handled
approximately 70 percent of the total fresh red meat and processed meat
sold by retailers in Texas during 1974.

Structural Characteristics of the
U. S. Retail Food Industry
The changing structure of the food retailing industry, including

innovations in buying and selling at the retail level, has had reverbera-

TABLE 1. GROCERY STORE POPULATION, SAMPLING RATE, STORES REPRESENTED BY
COMPLETED QUESTIONNAIRES, BY SELECTED AREAS AND TYPE AND SIZE OF FIRM, TEXAS,
1974

 

Type and size Grocery Stores represented
of firm and store Sampling by completed
location population ratel questionnaires
Number Percent Number Percent

2
Firms with ll or more stores?"

Dallas—Ft. Worth, Houston

and San Antonio 1,427 100.0 1,237 86.7
Other Texas 447 50.0 K 226 50.6
Total 1,874 88.1 1,463 78.1

Convenience firms with ll or
more stores:

Dallas—Ft. Worth, Houston

and San Antonio 1,218 100.0 975 80.0
Other Texas 284 33.3 149 52.5
Total 1,502 87.4 1,124 74.8

Firms with less than ll stores
and 4 or more supermarkets:

Dallas—Ft. Worth, Houston

and San Antonio 54 100.0 36 66.7
Other Texas 106 25.0 23 21.7
Total 160 50.0 59 36.9

Firms with less than ll stores
and l to 3 supermarkets:

Dallas—Ft. Worth, Houston

and San Antonio 95 33.3 15 15.8
Other Texas 336 10.0 32 9.5
Total 431 15.3 47 10.9

T Firms with less than ll stores
and no supermarketsté

E Dallas—Ft. Worth, Houston

and San Antonio 194 16.7 24 12.3
:Other Texas 373 10.0 16 4.3
Total 1 567 12.2 40 7.1

Y 1/ . 5. , ,

,i-Sampling rate was based on firms and stratified by area as indicated. There-
*1 fore, store numbers represented by the completed questionnaires may exceed the
actual sampling rate.

2/

f—-Does not include convenience stores, but all other retail grocery firms which
5 own or service ll or more stores.

3-The population numbers in this category appear to be understated.

   
 

7Source: 1973 Directory of Supermarket Grocery and Convenience Store Chains,
' Chain Store Age. '

tions throughout the slaughtering, processing, and distribution indus-
tries as well as within the food retailing industry. Major changes in
the food retailing industry include the chain store movement, the
establishment of supermarkets, the affiliation of independent grocers
with wholesale groups, and the more recent development of convenience
stores. gMany retail food stores have followed the lead of large re-
tail chains by integrating backward into wholesaling and processing.
Although this integration function has been employed by some of the
retail firms in their meat operations, it has been considerably more
extensive in the dry grocery products sector. Recently, interest in
central processing by retailers has grown, especially in breaking car-
casses into primals and subprimals in centralized facilities rather
than at individual stores. Other factors which have had an impact on
food marketing patterns include the development of food discount stores
and the continued existence of specialty food stores as meat markets.
The changing structure of the food retailing industry which was
generated by competitive forces within the industry is also a reflec-
tion of changing social and economic forces. The retail industry has
responded to such forces as a growing population, rapidly rising per
capita incomes, increased consumer mobility, increased numbers of women
entering the labor force, and improvements in transportation and refrig-
eration by changes in the number, size, and location of retail stores.
Two trends are predominant in the retail food industry. Total
store numbers are declining, while sales volume per store is increasing
(Table 2). The decline in store numbers from 1955 to 1973 is evident
mostly in the independent sector of the grocery retail industry, Almost

80 percent of the decline in the independent sector was attributed to

TABLE

2. GROCERY STORE NUMBERS AND ANNUAL SALES, AND TYPE OF STORE, UNITED
STATES, 1955*1973

Type of store

I  sqmwwwrw-wm-nw-w r1

Item Independent
and Grand
year Affiliated Unaffiliated Total Chain Total
Store numbers:
1955 101,000 223,500 324,500 18,800 343,300
1965 76,000 128,200 204,200 22,850 227,050
1970 69,400 104,700 174,100 34,200 208,300
1973 64,070 94,530 158,600 40,960 199,560
Annual sales: ———————————————————— ——Bi11ion dollars ——————————————————————— -~
1955 15,500 9,655 25,155 14,260 39,415
1965 31,800 6,100 37,900 27,205 64,925
1970 39,390 6,950 46,340 42,075 88,415
1973 48,790 7,950 56,740 56,390 113,130
Progressive Grocer, Annual Report of the Grocery Industry, April 1974.

Source:

the demise of unaffiliated independent stores, Although affiliated
independent stores declined 60 percent during this period, annual sales
of these stores more than tripled from 1955 to 1973, Chain stores,
firms with l1 or more stores, at the same time more than doubled in
numbers, while annual sales quadrupled.

The dominant forces in the retail food sector today are supermar-
kets (Table 3). Supermarkets accounted for almost 80 percent of the
total grocery sales in 1973, while supermarket store numbers made up
20 percent of the total. In 1974, supermarkets were defined as stores
with sales of $1,000,000 or more annually, compared with $500,000 or
more annually before 1974. Under the current definition, supermarkets
accounted for 72 percent of the total annual grocery sales in 1974 with
supermarket store numbers making up 16 percent of the total (Table 4).
Two—thirds of the supermarket sales were accounted for by chains, while
independents accounted for the remaining one—third. However, when total
grocery sales are considered, grocery receipts were split about equally
between chains and independents during 1974.

The growth and continued expansion of supermarkets have special
significance to the meat industry since meat constitutes about one—fourth
of consumer expenditures in supermarkets (Table 5). In addition, beef,
the single most important item merchandised by supermarkets on a sales
volume basis, accounts for one—third of the total meat sales by super-

markets.

Characteristics of the Texas Retail Meat Industry
The Texas retail food industry, similar to the national retail in-

dustry, has declined in total store numbers, while sales volume per store

TABLE 3. DISTRIBUTION OF GROCERY STORE NUMBERS AND ANNUAL SALES, BY
SIZE OF STORE, UNITED STATES, 1965-1973

Size of store

Item and 1/ 1/ 1/
year Small—- Superette— Supermarket—- Total
——————————————————— ——Percent-———————————-—————+—————
Store numbers:
1965 73.5 12.5 14.0 100.0
1970 65.5 16.1 18.4 100.0
1973 60.7 18.8 20.5 100.0
Annual sales:
1965 16.3 13.0 70.7 100.0
1970 11.7 12.9 75.4 100.0
1973 9.9 11.3 78.8 100.0

1/

—-Small — sales of less than $150,000 annually; Superette — sales from
$150,000 t0 $500 000 annually; and Supermarket - sales of $500,000 or
more annually.

Source: Progressive Grocer, Annual Report of the Grocery Industry,
April 1966, 1971 and 1974, respectively.

TABLE 4. GROCERY STORE NUMBERS AND SALES, VOLUME, BY SIZE AND T¥PE OF STORE,
UNITED STATES, 1974 ‘*

Number of stores Total dollar sales
Type of store ,3
and sales volume Number Percent Million dollars Pete;
Supermarkets 31,430 15.9 93,960 712
Chains 19,690 10.0 58,760 44§
$1,000,000 — $2,000,000 7,240 3.7 12,300 94
$2,000,000 — $4,000,000 8,770 4.4 26,300 20S
Over $4,000,000 3,680 1.9 20,160 15f
Independents 11,740 5.9 35,200 . 26}
$1,000,000 — $2,000,000 6,100 3.1 10,400 8n.
$2,000,000 - $4,000,000 4,080 2.0 13,900 10¢
Over $4,000,000 1,560 .8 10,900 80
Superettes ($500,000—$1,000,000) 11,500 5-3 9,675 7d
Cneine 2,000 1.0 1,600 10
Independents 9,500 4.8 8,075 6N
Small stores (under $500,00) 132,500 66-9 21,330 164
chains 2,500 1.3 880 .;
Independents 130 000 65.6 21,000 16¢
Conyenience stores » 22,700 ll-4 5e320 A 40
Total 198,130 100.0 5130,835 100- A

Source: Progressive Grocer, Annual Report of the Grocery Industry, April 1975.

 

TABLE 5. DISTRIBUTION OF CONSUMER EXPENDITURES
IN SUPERMARKETS, UNITED STATES, l960—l974
Year
Departments 1960 1970 1974
—————— —-Percent———————-—
Grocery 47.3 40.5 38.
Meat 21.9 28.3 23.
Frozen Foods 3.5 3.4 6.
Produce 10.0 7.6 7.
Bakery 6.2 5.0 4.
Dairy 11.1 10.3 9.
Ice Cream 1/ 1.1
HABA/General
Merchandise—/ 1/ 3.8 4.
Snack bar/deli. 1/ —— 4.
Total 100.0 100.0 100.
1/

—-Included in grocery department.

2/

—-HABA refers to health and beauty aids.

Source:

Progressive Grocer, Annual Report of the
Grocery Industry, April 1961, 1971 and 1975,

respectively.

10

has increased. Substantial change has occurred in the Texas retail meat
industry since 1960 with respect to type and quality of meat handled,
volume per store, promotional and advertising practices, and.Qther

operational practices at the firm and store level.

Type of Firms

Current data are not available concerning the types of firms com-
prising the Texas retail food industry. Data developed in the study re-
vealed that corporate chains, which are defined to exclude convenience
chains while including all other types of corporate organizations in-
cluding affiliated independents, comprised about 20 percent of the Texas
retail food firms and more than 40 percent of the retail stores in 1974.
These corporate chains accounted for more than 85 percent of the 1,040
million pounds of fresh and processed red meat sold by Texas retailers
during l974.

The retail grocery industry in Texas, as in the rest of the nation,

is dominated by supermarkets. Supermarkets, retail firms with $500,000

or more in sales annually, comprised about 90 percent of the grocery
stores by multiunit firms (excluding convenience chains) with one or
more supermarkets in Texas during 1974. These supermarkets accounted
for more than 90 percent of the fresh and processed meat sold through
retail food stores in Texas during 1974.

The Texas retail grocery industry for this study is classified as

shown in Table l. Firms with ll or more storeslj predominate in the

l I O I O
—/Reference to retail firms with ll or more stores excludes convenience
firms in this study unless convenience firms are specifically men-

tioned. It does include affiliated independent organizations.

" ‘s:

11

Texas retail food industry. The second most important group on the basis
of numbers are convenience firms, but these firms accounted for only a

small proportion of the meat items sold at retail.

Volume and Type of Meat Handled

Chain grocery firms and affiliated independent organizations which
owned or serviced ll or more stores accounted for more than 86 percent
of the fresh and processed meat itemsgj sold during 1974, followed by
firms with less than ll stores and l to 3 supermarkets with almost 8
percent of the total (Table 6), Convenience firms with ll or more stores
made up about one—third of the grocery stores but merchandised less than
one percent of the fresh and processed meat in Texas.

Steer and heifer beef, primarily fed beef, represented almost 40 per-
cent of the meat handled by retailers (Table 6). Next in importance were
smoked and cured pork, cow and bull beef and fresh pork. The importance
of ground meat is understated in Table 6 since much of the cow and bull
beef is sold as ground meat. Veal and lamb continue to be low volume
items at the Texas retail level.

The kind of meat items handled by retailers in 1974 represented a
substantial change from 1959 (1). Total beef in l959 represented 31 per-
cent of the fresh and processed meat items handled compared with 52 per-
cent in 1974. Calf and veal, primarily calf, made up 23 percent of the
total in 1959 compared with 8 percent in 1974. The higher proportion

of beef, especially steer and heifer, handled by retailers in 1974 as

compared with 1959 is reflective of consumer demands and changing live-

2 . . .
—/"Fresh and processed meat items" or meat refers to red meat items in
this study. Retail connotes items sold for home consumption.

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13

stock production patterns. In 1960, fed cattle marketings represented
slightly more than 51 percent of the U. S. comercial slaughter com-
pared with about 77 percent of the total in 1972 and 1973. In 1974
when the fed cattle industry was buffeted by high feed grain prices,
relatively low fed cattle prices, and inflationary forces, fed cattle
marketings represented about two—thirds of total U. S. commercial beef
slaughter. However, by mid 1975 fed cattle marketings represented
about the same proportion of U. S. commercial slaughter as they did in
the early 1960's.

When the average volume of meat handled per store is analyzed by
type and size of store, two interesting observations become apparent
(Table 7). Grocery firms with less than ll stores and 4 or more super-
markets handled the largest total volume of meat per store at 485,000
pounds, followed closely by firms with ll or more stores handling
471,000 pounds per store. Firms with 4 or more supermarkets but less
than ll stores tended to specialize most heavily in steer and heifer
beef, as this type of meat represented more than 55 percent of the total
meat items handled by these stores (Table 7). However, steer and heifer
beef, mostly fed beef, was the most popular type of meat handled by all
retail firms and ranged from 38 percent of the total for firms with
more than ll stores to 55 percent of the total for firms with less than
ll stores and 4 or more supermarkets.

The per capita fresh and processed red meat retail sales in Texas
during 1974 were equivalent to more than 86 pounds per person (Table 8).
Steer and éeifer beef, primarily fed beef, led retail sales volume with

34 pounds per person. Next in importance were smoked and cured pork,

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15

Table 3. ESTIMATED PER CAPITA FRES AND PROCESSED RED MEAT RETAIL GROCERY
SALES, BY KIND OF MEAT, TEXAS, 1974; ‘

Beef Smoked Sausage,
Steer Cow Lamb and variety
and and or Fresh cured Ground and

Item heifer bull Calf Veal mutton pork pork meatg other Total

—————————————————————————————— ——Pounds-—-————————-—-—-———————-———————-——-
Per
capit§/
sales- 34.1 10.9 7.2 .l .3 9.1 11.8 5.5 7.3 86.3

A/The Texas population was projected to be 12,050,000 in Current Population
Reports, Population Estimates and Projections, Series P-25, No. 533, Bureau
of Census, October 1974.

2 . . . . .

—/The various meat items are shown in their original purchased form. Total
per capita ground meat sales were estimated to be 22.8 pounds after cow and
bull beef and trimmings from other fresh meats were converted to ground meat.

3/

—-With the exception of smoked and cured pork, ground meat, and sausage, variety
and other meats, volume data for the various meat items were estimated by
retailers mostly on a carcass weight basis. However, retailers obtained
varying proportion of their fresh meats in non—carcass form or cuts as shown
in Table l4.

16

TABLE 9. ESTIMATED U. S. GRADE EQUIVALENTS FOR MEAT SOLD, BY KIND OF MEAT, TEXAS REE

TAILERS, 1974

4‘:

U. S. grade or grade equivalent i »

Kind of A U. S. Choice U. S. U. S. U. S. Comercial _
meat or higher Good Standardl/ and lowerZ/ To;
—————————————————————————— —-Percent--------————————————-——-—-7

Steer and heifer beef 78.9 19.3 1.8 3/ 1o
Cow and bull beef .1 2.0 18.7 79.2 lg
Calf 17.5 75.6 4.6 2.3 1o
Veal 72.3 8.7 3/ 19.0 
Lamb 87.4 _3_/ g/ 12.6 1o A
Ground meatfij .2 .7 Q] 99.1 105

L/The lamb and mutton is U. S. Utility. There is no U. S. Standard for bull beef,

3/

'~ None reported by respondents interviewed.

4/

— Grade distribution is based on purchased ground meat.

Z/The lamb and mutton is U. S. Cull. There is no commercial grade for calf or veal.;

‘ 17

cow and bull beef, fresh pork, and calf. Lamb and veal have been and

continue to be low sales volume items in Texas retail stores,

Quality of Meat Handled and Grading Practices Employed

Almost 80 percent of the steer and heifer beef sold by Texas re-
tailers in 1974 was equivalent in quality to U. S. Choice or higher
(Table 9), compared with 67 percent in 1964 (2). Although cattle feeders
curtailed much of their feeding activities in the latter part of l974
and much of 1975 as a result of unfavorable feeding conditions, these
data reflect a generally larger supply of fed beef available for slaughter
in 1974 and a greater emphasis on high quality beef by retailers.

More than three—fourths of the calf was estimated to be U. S. Good,
while veal and lamb were primarily U. S. Choice or higher. Cow and bull
beef, which is sold primarily as ground meat or sausage items, was pre-
dominantly U. S. Commercial or lower, as was fresh meat purchased as
ground meat.

The quality of meat handled by different size groups of retail firms
revealed two distinct patterns. Retail firms with ll or more stores and
those with less than ll stores but 4 or more supermarkets handled gen-
erally a similar quality of meat items (Appendix Tables l and 2). Approxi-
mately 9O percent of the steer and heifer beef handled by these firms
was estimated to be equivalent to U. S. Choice or higher. Other quality
similarities were noted for calf, lamb, and ground meat items. In con-
trast to the two larger types of retail firms, retailers with less than
ll stores but 1 to 3 supermarkets and also those with no supermarkets
handled generally a similar quality of meat items (Appendix Tables 3 and
4). This pattern was especially true for steer and heifer beef where

the two smaller types of retail firms emphasized U. S. Good.

18

Retailers estimated that 85 percent of the steer and heifer beef
and lamb were rolled with U. S. grades (Table 10), This was generally
anticipated since steers, heifers, and lambs generally undergo a feed-
ing or finishing process before slaughter. However, most of the calf,
cow and bull beef, and veal were also rolled with U. S, grades. The
purchased ground meat was generally ungraded, U. S, grades are not
used for pork items, but many pork items are sold under a packer or
retail brand. Retailers reported that almost 80 percent of the fresh
pork was unbranded, while two—thirds of the smoked and cured pork
carried either a packer or retailer brand. Retailers reported a sim-
ilar branding pattern for fresh and cured pork in l960, while less than
two—thirds of the total beef and calf, and about 43 percent of the lamb
were rolled with federal grades at that time (1), Most of the remain-
ing beef, calf, and lamb were packer branded in 1960, in contrast to
l974 when only small proportions of steer and heifer beef and calf were
packer branded.

Type of grading or marking by various size groups of retail firms
reveals that steer and heifer beef, calf and lamb were rolled predom-
inantly with U, S. grades by all firms (Appendix Tables 5, 6, 7, and 8).
The proportion of cow and bull beef rolled with federal grades declined
as firm size decreased. Branding patterns for pork items were gen-
erally similar for most retail firms with the majority of the fresh
pork ungraded, while smoked and cured pork was mostly packer or retailer

branded.

Centralized Fabrication and Processing

One—third of the total meat handled by Texas retailers during l974

TABLE 10.

MEAT, TEXAS RETAILERS, 1974

19

TYPE OF GRADING OR MARKING FOR FRESH AND PROCESSED MEAT, BY KIND OF

Type of grading or marking

U. S. graded

Kind of U. S. Private and Not graded

meat graded brandij private brand or branded Total

————————————————————— ——Percent—- -— ————

Steer and heifer beef 83.8 10.0 4.9 1. 100.0
COW and bull beef 67.3 .4 2/ 32. lO0.0
Calf 74.6 3.2 12.9 9. 100.0
Veal 58.8 Z] Z] 41. 100.0
Lamb or mutton 85.0 3.1 2/ ll. 100.0
Ground meat-li/ 12.2 g/ _2_/ 87. 100.0
Fresh pork §/ 22.2 Q] 77. 100.0
Cured pork _§/ 67.7 ff 32. 100.0

l/Packer or retail brand.

Z/None reported by respondents interviewed.

3/

—-Purchased as ground meat.

5/Fresh and cured pork are not U. S. graded.

20

was processed in a centralized fabrication center before store door
delivery. Retail firms with ll or more stores accounted for 90 percent
of the meat processed through retailer-owned or controlled centrbl ware—
house and fabrication facilities. These firms reported that almost 40
percent of the steer and heifer beef and 30 percent of the calf sold by
their stores were warehoused and processed through their centralized
meat fabrication centers. Much of this steer and heifer beef and calf
was warehoused for further aging and then processed into saw—ready cuts
for store door delivery. More than two-thirds of the cow and bull beef
was processed through a centralized, retailer-owned fabrication center.
Cow and bull beef is generally processed into ground meat for store door
delivery in 1-, 2-, 3- and 5—pound chubs. Fresh pork was generally not
processed through centralized retail fabrication centers, although about
one—third of the smoked and cured pork sold at the retail level moved
through centralized retail fabrication centers for additional slicing
and packaging. Approximately 40 percent of the fresh meat purchased as
ground meat was reground and/or repackaged into retail-sized packages

at centralized retail fabrication centers before store door delivery.

Sources of Meat Supplies
The geographic sources of meat purchases by retailers, as well as
sources of meat by type of supplier, varied by type of meat and size of
retail firm. However, retailers were dependent on Texas packers for the

vast majority of their fresh and processed meat supplies.

Geographic Sources of Meat Purchases

In 1974, Texas retailers purchased almost 80 percent of their total

21

red meat requirements from Texas sources (Table ll), compared with 83

4 percent in 1959 (l). Texas suppliers were major sources for all types

of meat items except lamb and fresh pork. Texas retailers obtained 75
percent of their steer and heifer beef within the state and relied pri-
marily on Kansas—Nebraska and Iowa for inshipments of steer and heifer
beef. Practically all of the calf, cow, and bull meat came from Texas
suppliers. Iowa was the major source of veal purchases from out—of—
state sources. Most of the fresh pork was obtained from out-of—state
suppliers to the north of Texas since Texas supplies are often inade-
quate to meet the retail requirements. Some retailers also expressed a
preference for fresh pork produced in the Corn Belt because they believed
the flavor and texture of this pork was preferred by their customers.
Lamb inshipments originated primarily from Colorado and Oklahoma, while
"other states" consisted primarily of South Dakota and inshipments from
New Zealand despite the fact that Texas is a lamb—exporting state.
Geographic sources of meat purchases by size of retail firm reveals
that as the size of retail firms declined, they became more dependent on
Texas sources for fresh and processed meat items (Appendix Tables 9, 10,
ll, and 12). The larger retail firms, especially those with ll or more
stores, accounted for most of the inshipments of fresh and processed
meat items such as veal, lamb, and fresh pork. Colorado and Oklahoma
were important out-of—state sources for lamb for retail firms with less

than ll stores.

Type of Meat Supplier
Packers supplied more than 96 percent of the fresh and processed red

meat items sold by Texas retailers in 1974 (Table 12), a l0—percent in-

TABLE ll. GEOGRAPHIC SOURCE OF MEAT PURCHASED, BY KIND OF MEAT, TEXAS RETAILERS, 1974 4

22

Kind of Ok1a— New Kansas- Colo— Other —
meat Texas homa Mexico Nebraska rado Iowa states Tota:
---------------------------- _-per¢ent-------------------------- 5
Steer and heifer beef 75.2 .1 3.7 6.6 1.4 6.4 6.6 10o.
Cow and bull beef 99.1 1/ 1/ 1/ 1/ 1] .9 100.6
Calf 99.4 _1_/ _1_/ _1_/ 1/ _1_/ .6 , 10o.:
Veal 56.7 1/ 1/ 1/ 1/ 43.3 1/ 100.6
Lamb or mutton 31.4 12.7 1/ 6.8 16.4 .8 31.9 100Qf
Fresh pork 40.6 9.9 3.2 19.6 _1_/ 16.2 10.5 100.
Cured pork 86.6 1.0 1.2 4.1 2/ 2.4 4.7 100.5‘
Sausage variety f
and other 86.0 .3 1.1 2.7 1/ 4.4 5.5 1005
Tehran 78.9 1.4 2.2 5.9 .7 5.4 5.5 10o..

Geographic source

i»

1/None reported by respondents interviewed.

2/

— Less than .05 percent.

TABLE 12.
RETAILERS, 1974

23

SOURCE OF MEAT, BY TYPE OF SUPPLIER AND KIND OF MEAT, TEXAS

Type of supplier

Packer Wholesale
Kind of Branch distributor
meat Packer House or jobber Other Total
—————————————————— ——Percent—————-————-———————-———
Steer and heifer beef 98.0 1.2 .8 lj 100.0
Cow and bull beef 98.3 .7 .8 .2 100.0
Calf 99.9 .1 lj lj 100.0
Veal 100.0 lj lj lj 100.0
Lamb or mutton 98.7 lj 1.3 _l/ 100.0
Fresh pork 95.9 2.1 2.0 lf 100.0
Cured pork 93.4 .7 5.9 1/ 100.0
Sausage, variety
and other 85.7 .3 8.4 5.6 100.0
Total 96.2 1.0 2.3 .5 100.0

1/None reported by respondents interviewed.

2/

— Less than .05 percent.

24

crease over 1959 (1). The remaining meat items originated mostly from
wholesale meat distributors or jobbers and packer branch houses.

Grocery firms with ll or more stores relied almost entirely on
packers for fresh and processed meat items (Appendix Table 13). However,
grocery firms with less than 11 stores purchased substantial quantities
of some meat items, such as lamb, fresh pork, cured pork and sausage,
and variety meat items from wholesale distributors and jobbers (Appendix
Tables 14, 15, and 16).

Retailers generally did not rely on brokers for obtaining fresh and
processed meat items, but local sales representatives arranged for the
delivery of about 14 percent of the meat items merchandised by Texas re-
tailers during 1974 (Table 13). Local sales representatives supplied more
than 46 percent of the veal sold by Texas retailers in 1974. However,
substantial proportions of all types of fresh and processed meat items,
with the exception of cow and bull beef, were supplied to Texas retailers

by local sales representatives.

Form of Meat Purchases and Sales

Form of Meat Purchases

Form of meat purchases has changed substantially for some meat items
during the last decade as a result of technological improvements in film
wrapping, vacuum packaging, and boxed meat programs. Retailers esti-
mated that two—thirds or more of their total beef, calf, veal and lamb
was purchased in carcass form during 1974 (Table 14). This was not a
sharp change from 1959 when Texas retailers obtained 69 percent of their

beef, 81 percent of their calf and veal, and 89 percent of their lamb

TABLE 13.

25

SALE REPRESENTATIVES, BY KIND OF MEAT, TEXAS RETAILERS; 1974

Kind of Local sale
meat Brokers representatives
------------- --Percent

Steer and heifer beef .6 14.3
Cow and bull beef 4.2 7.7
Calf 1.3 15.1
Veal 1/ 46.2
Lamb or mutton 5.8 27.6
Fresh pork 1/ 15.3
Cured pork .7 13.2
Sausage, variety

and other 4.8 20.8
Total 1.5 14.2

1/None reported by respondents interviewed.

PERCENT OF MEAT PURCHASED THROUGH BROKERS AND LOCAL PACKER

TABLE 14. FORM OF MEAT PURCHASED, BY KIND OF MEAT, TEXAS RETAILERS, 1974
Form of meat purchased
Kind of . Sub— Retail 1/
meat Carcass. Quarters Primals primals cuts Other—- Total
———————————————————————— ——Percent—————————----—————-—~——---
Steer and heifer beef 65.9 ' 8.8 15.2 10.1 2_/ _2_/ 100.0
Cow and bull beef 60.7 2.1 .1 .9 2/ 36.2 lO0.0
c.5112 88.1 2.8 9.1 g/ g/ 2f 100.0
Veal 82. 7 17 . 3 g/ g/ g/ g/ 100 .0
Lamb or mutton? 77.4 .6 13.2 2/ 2/ 8.8 100.0
Fresh pork .8 2/ 79.0 19.6 .6 2/ 100.0
1/Boneless.

Z/None reported by respondents interviewed.

26

and mutton in carcass form, while 76 percent of the fresh pork was pur-
chased in the form of primal cuts (1). Steer and heifer beef not pur-
chased as carcass beef in 1974 was purchased in the form of quarters,
primals, and subprimals, while the noncarcass cow and bull beef was pur-
chased as boneless beef. Noncarcass veal was obtained primarily in
quarters, whereas lamb was obtained mostly in primal cuts. Almost 80
percent of the fresh pork was bought as primal cuts with the remaining
volume consisting primarily of subprimals. These results reveal that the
form of meat purchases by retail firms changed only slightly during
1959-74, but the form in which meat is handled internally has changed
considerably via centralized retail fabrication centers.

Although some variation existed in the form of meat purchases among
varying size groups of retail firms, grocery firms with ll or more
stores purchased a substantially larger proportion of their cow and bull
beef in carcass form than did smaller retail firms (Appendix Tables 17,
l8, l9, and 20). Centralized warehousing and fabrication facilities
were generally more prominent at firms with ll or more stores; conse-
quently, these firms are often able to accrue savings by fabricating cow
and bull carcasses at their centralized fabrication centers.

The increased purchases of primals and subprimals during 1974 com-
pared with 1959 may be attributed largely to the advent of boxed meat
programs. Boxed meat purchases by retailers were confined to steer and
heifer beef, cow and bull beef, lamb, and fresh pork (Table 15). Almost
44 percent of the fresh pork handled by Texas retailers was purchased as
boxed meat, followed by boneless cow and bull beef with 27 percent.
Steer and heifer boxed meat purchases represented less than 16 percent

of the steer and heifer beef merchandised.

27

TABLE 15. PERCENT OF MEAT PURCHASED AS BOXED MEAT, BY KIND OF MEAT,
TEXAS RETAILERS, 1974

Kind of meat

Steer and Cow and Fresh
Item heifer beef bull beef Calf Veal Lamb pork
—————————————————————— --Percent——-—---———-——-—-—————-——-—

Boxed meat
purchases 15.6 27.4 l/ lj 21.4 43.6

1/None reported by respondents interviewed.

Form of Meat Sales

Fresh and processed meat items are merchandised almost exclusively
in the form of retail cuts or ground meat by retailers (Table l6). How-
ever, small volumes of steer and heifer beef, about 2 percent, were sold
to consumers as home freezer or locker beef. The remaining 98 percent
was merchandised as retail cuts or ground meat. Ground meat may accumu-
late from higher quality cuts as a result of trim and from retail cuts“
that occasionally are "slow—movers" in the retail counter. This is

evidenced by the proportion of ground meat emanating from steer and

fheifer beef, calf, veal, and lamb. Cow and bull beef is generally pur-

chased by retailers for conversion into ground meat. Total ground meat
sales consequently represented about 26 percent of the total fresh and

processed meat items sold by Texas retailers.

28

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More than 55 percent of the ground meat sold by retailers contained
a lean to fat ratio ranging from 70 to 79 percent (Table 17). Most of
the remaining ground meat contained a lean to fat ratio of 80 to 89 per-
cent. Ground meat with textured vegetable protein (TVP) represented

slightly more than 7 percent of the total ground meat sales.

TABLE 11 PERCENT OF GROUND MEAT SALES, BY LEAN MEAT TO FAT
RATIO, AND PERCENT OF GROUND MEAT CONTAINING TEXTURED VEGE~
TABLE PROTEIN (TVP), TEXAS RETAILERS, 1974

Item Percent

Lean to fat ratio:

70 to 79 percent 55.7
80 to 89 percent 38.3
90 percent or more _ 6.0
Total lO0.0
Ground meat sales with TVPN 7.3

Purchasing and Selling Practices
Meat buying practices of retail firms varied by type and size of
firm and also by kind of meat purchased. Pricing practices, especially
gross margins, frequency of specials, and amount of markdown from regu-
lar prices during specials also varied considerably by type and size of

firm and kind of meat.

Meat Purchasing Practices

Texas retail firms purchased fresh and processed meat items on a strict

30

specification basis. For example, typical steer beef specifications
during l974 were carcass weights ranging from 600 to 700 pounds, U.S.D.A.
Choice, and yield grades 2 or 3. Some retailers rejected all carcasses
not selected or approved by their buyer, while others relied on suppliers
to deliver according to prescribed specifications. The overall carcass
weight specifications for steers ranged from 550 to 800 pounds with some
firms specifying carcass weights within 50—pound ranges. In addition,
numerous retail grade specifications included either the top, the middle,
or the lower one—third of the specified grade. Although the predominant
majority of the retailers specified U. S. Choice, those accepting U. S.
Good generally did not accept carcasses yield—grading lower than U. S.

2, while acceptable weight ranges for such carcasses were often 100
pounds lighter than U. S. Choice steer carcasses. While some of the car-
casses quality grading U. S. Good were heifers, many retailers‘ speci-
fications did not include heifers. Those carcasses not meeting retailer
specifications were rejected upon delivery.

Calf specifications by retailers generally centered on U. S. Good,
but weight specifications varied widely as did retailers' definitions of
calf. For example, the average low and high carcass weight range for
calf varied from 290 to 360 pounds, while the overall range varied from
225 to 425 pounds.

The average carcass weight specifications for lamb ranged from 45
to 55 pounds, and the grade specified was U. S. Choice or higher. The
overall weights specified for lamb by Texas retailers varied from 35 to
70 pounds during 1974.

Pork specifications included weight ranges for particular cuts and

trim. The trim specification used most often was "l/4 inch or less fat

....Q~,.u..;_.u. -  "

31

covering,"

with some retailers accepting a l/2-inch or less fat covering
while others specified a regular trim. Weights specified most often for
pork cuts were loins, 14 to 17 pounds; butts, 4 to 8 pounds; spareribs,
about evenly divided at 3 pounds or less and 3 to 5 pounds; fresh hams,
14 to l7 pounds; picnics, 6 to 8 pounds; and smoked hams, 17 to 20
pounds.

The majority of the retail firms were dependent upon two to five
suppliers for fresh meats, but most acknowledged using two to three
times as many suppliers for nonfresh meat items. Slightly more than 52
percent of the retailers acquired their total meat items from 2 to 5
suppliers, 21 percent used 6 to 10 suppliers, 21 percent relied on ll
to 20 suppliers, and the remaining 6 percent used more than 20 suppliers.

Almost all retailers used at least 2 suppliers for their fresh
meats to assure adequate supplies, consistent quality, and competitive
prices. Some retailers acknowledged using one primary supplier for
beef, but they often purchased some beef from a secondary supplier to
assure themselves of a backup supply source as the need arose.

Retailers generally acquired nonfresh or processed meat items from
8 to 20 suppliers. Dependency upon a greater number of suppliers for
nonfresh meats compared with fresh meat is generally a result of the
availability of relatively larger number of brands and specialty items

Min the nonfresh meat line. In addition, the longer shelf life, or

“relatively greater nonperishability of nonfresh meats, allows retailers

to offer a wider array of nonfresh meat items as well as greater mer-
chandising flexibility.
When retailers were asked who "sets or determines" the prices they

pay for fresh or processed meat items, responses varied according to

32

size and type of retail firm. More than three—fourths of the larger re-
tail firms, those with ll or more stores and also those with less than
ll stores and 4 or more supermarkets, acknowledged using the National
Provisioner "Yellow Sheet" either as a pricing guide or as a direct
formula basis in establishing their purchase price. Prices based on a
formula basis as related to the Yellow Sheet generally specified

(1) F.O.B. point of origin, (2) a specified value above the Yellow

Sheet by kind of meat item (normally in cents per pound), and (3) a
specified closing date such as, for example, Tuesday. Formula pricing
was generally negotiated on a carcass weight basis, on a carload trading
price, or on weights of specified cuts. Retailers often also used the
Yellow Sheet as a pricing guide in purchasing meat under the "offer and
acceptance" method. This method has been fairly common throughout the
meat industry for several decades (1, 3). Under this method, packers
provide chains with a price list by type of meat for the following week
on a weekly basis. Meat supervisors of the retail firms obtain esti-
mates from individual store meat managers concerning the quality and
quantities of meat required and place orders with the packers quoting
the lowest or best price for delivery on specified dates.

The smaller retailers, those with less than ll stores and l to 3
supermarkets or no supermarkets, almost universally stated that packers
or wholesalers set the purchase price for their meat items. Although
these retailers have access to wire service price information in their
suppliers‘ offices, they generally did not cite the U. S. Department of
Agriculture or other types of comercial price information sources as a

pricing guide.

33

Meat Selling Practices

More than 70 percent of the Texas retailers used a predetermined
markup to establish prices for their fresh and processed items during
l974. Retailers generally do not use a consistent markup on all items
but attempt to achieve a composite desired gross margin. Most of these
retailers relied on detailed cutting tests to establish actual costs
for fresh meat items before determining or setting their sales price.
Cutting tests also provide retailers with information concerning trim
loss and shrink. Retailers who did not use cutting tests relied pri-
marily on their delivered cost as a basis for determining sales prices.
Retailers not using predetermined markups to establish prices for their
meat items stated that market competition and movement of the various
meat items were their major guidelines in establishing sales prices.

Margins by Texas retailers for fresh and processed meat items
varied by type of meat item. For example, composite gross margins}!
on heavy beef averaged about 22 percent and ranged from l8 to 30 per-
cent. These results are similar to those discovered by Farris in a
study of realized retail margins for meat and beef in large U. S. re-
tail food chains (4). The variation in markups for a particular type
of meat, such as beef, is often due to specifications regarding trim,
weight of the carcass, sex, or type of cut merchandised. Gross margins
on calf averaged 23 percent with a range of l8 to 30 percent, fresh
pork margins averaged 23 percent and ranged from 20 to 30 percent. Mar-

gins on smoked and cured products averaged 25 percent with a range of

2/Gross margin = sales minus cost of goods sold divided by sales.
Markup = sales minus cost of goods sold divided by cost of goods sold.

20 to 33 percent. The margins on processed and variety meat items
other than smoked and cured products averaged about 30 percent.
Retailers used several techniques to merchandise meat items which
did not move readily and became aged, thereby losing bloom and optimum
appeal to customers. Approximately 53 percent of the retailers con-
verted red meat, primarily beef, to ground meat whenever such items
were not sold within 2 to 3 days. Some retailers trimmed or resurfaced
and repackaged some of their roasts, but if the repackaged items were
not sold within one day, the roasts were converted to ground meat or
stew meat. In any event, the converted products were merchandised at a
lower price than the original product. Almost 33 percent of the re-
tailers generally reduced the price of the various fresh meat items from
20 to 35 percent, in a few instances up to 50 percent, to encourage sales
of slow—moving products. Another 14 percent disposed of slow—moving
items by selling them to employees at reduced prices, by selling them
as pet food, or by giving individual store managers authority to handle
or dispose of slow—moving items in the most economical manner. The re-
tailers generally agreed that fresh red meat products must be sold within

an allotted time period in their original or converted form or must be

disposed of to maintain customer satisfaction.

Promotional and Advertising Practices
Although Texas retail firms advertise and promote fresh and processed
products through various media, the prime purpose of such activities was
to increase or maintain sales and market position. Most retailers
acknowledge that "specialing" and advertising were essential to remain

competitive in the market. The concern with competitive position in the

s» _‘

ilpolicy with regard to the percent of gross sales allocated for promotion

35

market is reflected in the frequency with which retailers featured or
had specials on fresh and processed meat items.

More than 57 percent of the retailers featured specials on fresh
and processed meat items on a weekly basis. Another ll percent featured
meat specials twice per week, 6 percent did so on a monthly basis, and
4 percent featured specials on a daily basis. Twenty percent, primarily
small country retailers and convenience firms, generally did not feature
specials or maintain regular promotional programs. Many firms which
featured specials twice per week or on a weekly basis featured such items
from 4 to 7 days per week. Specialing, in effect, has become a way of
life for retailers who are concerned with their competitive position in
the market even though retail meat departments occasionally operate at
a loss for short periods.

Retailers relied on newspapers, radio, television and circulars or
handbills to promote specials and advertise fresh and processed meat
items. Many of the larger retailers used all four media for advertise-
ments, but newspapers, both daily and weekly, were used most frequently
by 67 percent of the retailers. The second most comon media were
circulars or handbills which were used by 37 percent of the firms.
Another 21 percent were dependent upon the radio media, and 16 percent
also featured specials on television.

More than 42 percent of the retail firms maintained a standard
and advertising of fresh and processed meat items. Fifty—one percent
maintained no standard policy of gross sale allocation for such expendi-

tures, and another 7 percent maintained a flexible policy regarding

gross sale allocation for advertising expenditures. Approximately 80

 

percent of the larger firms, those with ll or more stores, maintained
standard programs for allocation of gross sale revenues for promotion
and advertising, while less than one—third of the smaller retailers
maintained standard policies regarding gross sale allocation for pro-
motion and advertising.

The percent of gross sales from fresh and processed meat items allo-
cated to promotion and advertising ranged from 0.2 percent to 2 percent
during 1974. More than three—fourths of the firms reported that their
gross sale allocation for advertising and promotion ranged from l to
2 percent, while most of the remaining firms allocated less than l
percent of their gross sales for advertising.

More than 60 percent of the retail firms featured roasts or round
steaks more frequently than other types of meat items. Other featured
items in order of importance were pork loins, ground meat, and T—bone
or sirloin steaks. In addition to these, bacon, sausage, luncheon meats,
brisket, ribs, hind and fore—quarters, and variety meats were often also
featured during 1974.

Almost one—half of the firms decreased regular prices from 10 to 20
percent during specials, although markdowns varied considerably for dif-
ferent types of meat items. Another 25 percent decreased prices on an
average from 21 to 30 percent. More than 7 percent reported price de-
clines exceeding 4O percent during specials. However, markdowns by
retailers who featured specials on a weekly or more frequent basis gen-
erally ranged from 10 to 30 percent.

According to 83 percent of the retail firms interviewed, specials

increased total meat sales from about 20 to 40 percent. Depending upon

37

time of month and type of meat items specialed, sales increases from
100 to 200 percent were not unusual for some meat items being pro-
moted through specials. Ten percent of the retail firms indicated that
specials had little or no effect on sales, while 7 percent were unable
to provide estimates of whether specials increased or decreased meat
sales.

The effect of meat promotions and specials on total retail sales
brought varied responses from retailers interviewed. Forty percent
stated that it was difficult to provide an estimate of the total sales
response to meat specials since meat promotion programs were conducted
on either a daily or weekly basis throughout the year and often in con-
junction with other specials. About 25 percent either did not conduct
specials or did so on an infrequent basis, such as at grand openings.
Five percent of the firms stated that overall company sales did not change
since they conducted specials on a daily basis. Thirty percent of the
firms provided estimates of total retail sales increases resulting from
meat promotion programs. Of these, 40 percent observed total company
sales increases ranging from 1 to 5 percent, 28 percent perceived in-
creases from 6 to lO percent, and the remaining one-third said total
sales increased over l0 percent.

These results suggest that meat promotions and specials have become

a standard business practice for many retailers since such programs are

conducted on a continuous basis. These programs are considered necessary

 

for either increasing meat or store sales, keeping sales from falling,
or maintaining market position. The net results for many retail firms

apparently has been an increase in total sales. However, since meat

38

promotions and specials are conducted on a weekly or daily basis for
much of the industry, the increase in total sales as a result of meat
specials has become relatively constant at a higher sales plateau.

Such higher sales levels have become the expected norm for many of these

retailers.

SUMMARY

The Texas grocery industry is characterized by large diversified
supermarkets which feature one—stop shopping. These supermarkets are
highly departmentalized, they are located and constructed to provide re-
latively easy accessibility both outside and inside individual stores,
and they are competitive in terms of price, quality of product, and
services provided.

The growth and expansion of supermarkets has special significance
to the meat industry since meat constitutes about one—fourth of the con—
sumer expenditures in supermarkets. In addition, beef, the single most
important item merchandised by supermarkets accounts for about one—third
of the total meat sales.

In 1974, supermarkets accounted for more than 90 percent of the
1,040 million pounds of fresh and processed red meat merchandised by
Texas retail food stores. Grocery firms with ll or more stores, includ-
ing affiliated independents, accounted for more than 86 percent of the
fresh and processed meat items sold by Texas retail food stores during
1974.

Steer and heifer beef, primarily fed beef, represented almost 40
percent of the fresh and processed red meat items handled by retailers
during 1974.

Next in importance were smoked and cured pork with 14 per-

cent, cow and bull beef with 13 percent, and fresh pork with ll percent.

1». _

" w;

39

Average volume of meat handled per store provided several interest-
ing observations. Firms with less than ll stores but 4 or more super-
markets handled the largest volume of meat per store at 485,000 pounds.
A close second were grocery firms with ll or more stores, comonly re-
ferred to as large chains, with 471,000 pounds per store. In addition,
firms with 4 or more supermarkets and less than ll stores, primarily
local independents and affiliates, specialized most heavily in steer
and heifer beef as this type of meat represented more than 55 percent of
the total fresh and processed red meat items handled by these stores.

One—third of the total meat handled by Texas retailers during 1974
was processed through a centralized retail fabrication center before
store door delivery. Retail firms with ll or more stores accounted for
90 percent of the meat processed through retail warehouses and fabrica-
tion centers. These firms reported processing more than two—thirds of
their cow and bull beef, almost 40 percent of their steer and heifer
beef, and 30 percent of their calf through centralized warehousing and
fabrication facilities.

Approximately 80 percent of the steer and heifer beef sold by Texas
retailers was estimated to be equivalent in quality to U. S. Choice or
higher in 1974. The larger firms, those with ll or more stores and
also those with 4 or more supermarkets, reported that 90 percent of the
steer and heifer merchandised by their stores was equivalent to U. S.
Choice or higher. More than three—fourths of the calf sold by retailers
was estimated to be U. S. Good, while veal and lamb were primarily U. S.

Choice or higher. Cow and bull beef, which is sold mostly as ground

meat or sausage items, was predominantly U. S. Comercial or lower.

40

Texas retailers purchased almost 80 percent of their total red
meat requirements from suppliers within Texas in 1974 compared with
83 percent in 1959, These suppliers were almost exclusively packers.
Texas suppliers were major sources for all types of meat items except
lamb and fresh pork. Inshipments of steer and heifer beef and fresh
pork originated primarily from KansaseNebraska and Iowa. Iowa was also
the major source for out—of—state veal supplies. Lamb inshipments
originated mostly from Colorado, Oklahoma, South Dakota, and New Zea-
land.

Retailers estimated that two-thirds or more of their total beef,
calf, veal, and lamb was purchased in carcass form during l974. Steer
and heifer beef not purchased as carcass beef in 1974 was purchased as
quarters, primals, and subprimals, while the noncarcass cow and bull
beef was purchased as boneless beef. Fresh pork was purchased pre-
dominantly in wholesale or primal cuts.

Boxed fresh meat purchases varied by kind of meat item. Almost 44
percent of the fresh pork was purchased as boxed meat compared with 27
percent of the cow and bull beef. Boxed steer and heifer beef repre-
sented less than l6 percent of the steer and heifer beef purchased by
retailers.

With the exception of cow and bull beef, which was sold as ground
meat, four—fifths or more of the remaining fresh meat items were mer-
chandised as retail cuts with the remainder being sold mostly as ground
meat. Retailers also convert trim from higher quality cuts and some
slow—moving items into ground meat. Consequently, ground meat repre-
sented more than 26 percent of the fresh and processed meat items mer-

chandised.

41

Texas retailers purchased fresh and processed meat items under a
strict set of specifications concerning weight, sex where applicable,
quality grade and yield grade, trim, and color. For example, typical
specifications for steer beef were for carcass weights ranging from
600 to 700 pounds, U. S. Choice, U. S. Yield Grade 3 or lower, and
often specifications regarding trim or fat cover and color. The vast
majority of the retailers specified U. S. Choice for steer and heifer
beef; those accepting U. S. Good often did not accept carcasses yield-
grading lower than U. S. #2. Calf specifications generally centered
on U. S. Good, but weight specifications varied widely as did retailers’
definitions of calf. Lamb specifications were U. S. Choice or higher
with carcass weights ranging from 45 to 55 pounds. Pork specifications
included weight ranges for particular cuts and associated trim. Pork
trim specifications used most often were l/4-inch or less fat covering
with some retailers accepting a 1/2-inch or less fat covering. Weight
specifications varied by type of cut.

More than three—fourths of the larger retailers, those with ll or
more stores and those with less than ll stores but 4 or more supermar-
kets, used the National Provisioner Yellow Sheet either as a pricing
guide or as a direct formula basis in establishing their purchase price.
Retailers often also used the Yellow Sheet as a pricing guide in pur-
chasing fresh and processed items under the offer and acceptance method.

Over 70 percent of the Texas retailers used a predetermined target

gross margin to set prices for fresh and processed meat items during 1974.

Margins varied between meat items and by type of meat. Margins on heavy

beef averaged about 22 percent, it averaged 23 percent for both calf

42

and fresh pork but averaged slightly higher for smoked and cured pork
and other processed items.

Retailers used several techniques to merchandise slow—moving meat
items. Approximately 53 percent converted these items, primarily beef,
to ground meat whenever such items were not sold within 2—3 days.

Other retailers trimmed and repackaged some of the thicker meat items
such as roasts, but if such items were not sold within a day they were
converted to ground meat or stew meat. Another 33 percent reduced the
price of slow—moving items from 20 to 35 percent and occasionally up

to 50 percent to encourage sales of slow—moving meats rather than re-
face and rewrap such items, Other retail firms gave store managers
authority to handle or dispose of slow—moving items in the most economi-
cal manner.

Meat promotion and advertising has become a standard business
practice for most store managers since the meat department is a major
competitive tool. More than 57 percent featured specials on fresh and
processed meat items on a weekly basis, while another ll percent fea-
tured meat specials twice per week. Many of these firms featured
specialed items from 4 to 7 days per week. Most of the remaining re-
tailers, which were primarily small country retailers or convenience
firms, did not feature specials or maintain regular promotional programs.

Over 60 percent of the retail firms featured roasts or round steaks
more frequently than other types of meat items. Other items often fea-
tured included pork loins and chops, ground meat, ribs, bacon, and
luncheon meats.

Price discounts or markdowns during specials varied considerably by

43

type of meat item. However, markdowns by retailers featuring specials
on a weekly or more frequent basis generally ranged from 10 to 30 per-
cent.

Over four—fifths of the retailers found that specials increased
total meat sales from 20 to 40 percent. Sales increases from 100 to 200
percent were not unusual for some items being promoted through specials.

The effect of meat promotions and specials on total store sales
brought varied responses from retailers. Forty percent found it diffi-
cult to provide an estimate since meat promotion programs were conducted
on either a daily or weekly basis throughout the year. One-third of the
firms said total store sales increased from l to 10 percent as a result
of specials. Most of the remaining firms either did not conduct spe-
cials or did so on an infrequent basis. Although many retailers were
unable to estimate total store sale response from meat specials, most
of the firms said specials were necessary for either maintaining or
increasing sales in the competitive retail industry.

Some of the future considerations and implications for the retail
meat industry may be thus defined:

l. The expansion and growth of large retail stores, namely super-

markets, will continue but at a slower pace.

2. Store numbers will continue declining; however, sales per store

and especially store size is expected to increase but at a
reduced rate. Supermarkets may face increasing competition
from large retail units which feature cost—cutting techniques
via warehouse or bulk sales and merchandising facilities.

Although convenience stores handle only small quantities of red

44

meat items, they will likely become more important outlets for
selected retail cuts and fast food items.

Retail firms have and will continue to demonstrate greater
flexibility in store design and layout, in location with
respect to population density, and in intrafirm policies re-
garding type, quality, and quantity of various fresh and
processed meat items merchandised. This consumer orientation
is reflected in the amount of counter space being allocated to
various types of beef, such as long—fed beef and short—fed beef
(including non—fed beef).

Centralized warehousing and fabrication facilities have pro-
vided cost economies with respect to acquisition, handling, and
distribution of fresh and processed meat items. Lack of
economies of size may prohibit medium— and smaller—sized retail
firms from implementing centralized warehousing and fabrication
facilities. However, medium— and smaller—sized retail firms
may find it economical to obtain such services on a custom
basis from wholesalers or packers whenever such services are
deemed necessary.

Boxed meat programs have generally proven successful as a meat
handling and merchandising technique, but continued resistance
is anticipated from labor and other self—interest groups.
Nevtrtheless, consumer and regulatory groups may encourage boxed
beef because of potential sanitation improvements.

The intensity of promotions and advertising by the retail gro-
cery industry in competing for customers will not only continue

but will likely increase in the future. Meat departments will

45

continue to be important merchandising and promotional tools
to attract and retain customers rather than the profit—centers

so often envisioned by various individuals and consumer groups.

LITERATURE CITED

Dietrich, R. A., W. F. Williams, and J. E. Miller. 1963. The Texas-
Oklahoma meat industry——structure and marketing practices. Market-

ing Economics Division, ERS, U. S. Dept. of Agr., AER No. 39.

Dietrich, R. A. 1967. Price information and meat marketing in Texas
and Oklahoma. Marketing Economics Division, ERS, U. S. Dept. of

Agr., AER No. 115.

Dietrich, R. A., and W. F. Williams. 1959. Meat distribution in the
Los Angeles area. Marketing Research Division, AMS, U. S. Dept. of

Agr., MRR No. 347.

Farris, D. E. 1974. Estimates of realized retail margins for meat
and beef for large retail food chains. Texas Agr. Exp. Sta.,

Special Report for the National Association of Food Chains.

Progressive Grocer. Annual Report of the Grocery Industry, April

1961, 1971, and 1975, respectively.

APPENDIX TABLES  

47

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48

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APPENDIX TABLE 21.
STORES, 1974

56

FORM OF MEAT SALES, BY KIND OF MEAT, IN TEXAS GROCERY FIRMS WITH ll OR MORE

Form of meat sales

Kind of Sub- Retail Ground
meat Carcass Quarters Primals primals cuts meat Total
Percent
Steer and heifer beef .4 .7 .4 .6 82.3 15.6 100.0
Cow and bull beef y y y y y 100.0 100.0
Calf .8 y y y 87.2 12.0 100.0
Veal y y y y 98.2 3.8 100.0
Lamb or mutton lj lj ll 1/ 96.7 3.3 100.0
Fresh pork 1/ 1/ .5 1/ 99.3 .2 100.0
Cured pork y y y y 100.0 y 100.0
Ground meatéj _§/ Z] Z] 2/ 100.0 Z] 100.0
Sausage, variety
and other y y y y 100.0 y 100.0
lJNone reported by respondents interviewed.

2/Not applicable.

Q/

APPENDIX TABLE 22.

Purchased as ground meat.

STORES AND 4 OR MORE SUPERMARKETS, 1974

FORM OF MEAT SALES, BY KIND OF MEAT, IN TEXAS GROCERY FIRMS WITH LESS THAN ll

Form of meat sales

Kind of Sub- Retail Ground

meat Carcass Quarters Primals primals cuts meat Total

9ercent

Steer and heifer beef .1 .3 lj 1.2 85.6 12.8 100.0
Cow and bull beef y y y y .4 99.6 100.0
Calf_ y y y y 88.1 11.9 100.0
Veal y _l_/ y y y y y
Lamb or mutton y y y y 97.2 2.8 100.0
Fresh pork y y _l_/ y 100.0 y 100.0
Cured pork 2/ _2_/ 2/ 2/ 100.0 _2_/ 100.0
Ground meatll 2/ 2/ 2/ 2/ 100.0 2/ 100.0
Sausage, variety

and other y y y y 100.0 _2_/ 100.0

2/None reported by respondents interviewed.

Z/Not applicable.

3/

— Purchased as ground meat.

5 7
APPENDIX TABLE 23. FORM OF MEAT SALES, BY KIND OF MEAT, IN TEXAS GROCERY FIRMS WITH LESS THAN ll
STORES AND l TO 3 SUPERMARKETS, 1974
Form of meat sales
Kind of Sub— Retail Ground
meat Carcass Quarters Primals primals cuts‘ meat Total
Percent
Steer and heifer beef .4 .2 If lj 76.6 22.8 100.0
Cow and bull beef lf lj If I] 6.6 93.4 100.0
Calf y y y y 90.0 10.0 100.0
Veal . y y y y 100.0 y 100.0
Lamb or mutton _l/ 1/ 1] _l/ 100.0 _l/ 100.0
Fresh pork 1/ 1] 1] _L/ 99.4 .6 100.0
Cured pork Z] _Z/ Z] Z] 100.0 2] 100.0
Ground meaty y _2_/ y y 100.0 y 100.0
Sausage, variety
and other Z] 2/ Z] Z] 100.0 Z] 100.0
L/None reported by respondents interviewed.

Z/Not applicable.

3/

—-Purchased as ground meat.

APPENDIX TABLE 24. FORM OF MEAT SALES, BY KIND OF MEAT, IN TEXAS GROCERY FIRMS WITH LESS THAN ll
STORES AND NO SUPERMARKETS, 1974

Form or meat sales

Kind of Sub— Retail Ground
meat Carcass Quarters Primals primals cuts meat Total
Percent

Steer and heifer beef 6.9 7.8 1]‘ _l/ 63.8 21.5 100.0
Cow and bull beef lj .3 ‘If _l/ 37.7 62.0 100.0
Calf _ y y y y y y _2_/
Veal y y y y 50.0 50.0 100.0
Lamb or mutton _l/ If If _l/ 100.0 _l/ 100.0
Fresh pork y y y y 100.0 y 100.0
Cured pork _3_/ y _3_/ y 100.0 _3_/ ‘ 100.0
Ground meati/ Q] _§/ Q] Q] 100.0 §] 100.0
Sausage, vgriety

and other _§/ Q] Q] §] 100.0 §] 100.0
l/None reported by respondents interviewed.
2/Included with steer and heifer beef.
2/Not applicable.
4/

—-Purchased as ground meat.